PI - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Impinj Inc.

Second Quarter 2020 Earnings Conference Call. All participants will be a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to conference like Hayes-Roth, to now Relations. Investor would turn over the Ellen I ahead. go Please

Ellen Hayes-Roth

and call, XXXX operator. opportunity with you, of joining second On overview will and discuss for and follow a provide Cary financial us Impinj's Impinj's commentary. second third brief today's our Baker, CEO, results. CFO, will XXXX our quarter Thank review quarter afternoon, performance. XXXX to a Good market results detailed thank of Diorio, quarter Co-Founder and Chris you all Impinj's

will open the Impinj's along remarks, join Q&A also Relations Investor call We then questions. the the Jeff Impinj's on prepared will Chief on with section call of Dossett, trended and Chris for in Management's is and financial Cary Revenue data, website. Officer, session. available the are

authorities, call, Litigation government XXXX. potential such statements, within of customers, as the only they historical of are that note or objectives or forward-looking the conference meaning please the financial expected represent results, date will expected forward-looking this regarding and Private to COVID-XX. the of call. plans, prospects; from To make the that are responses potential the our not during statements the condition our and make or our outlook of impact start the performance; such we Reform COVID-XX or Before on certain company Act extent Securities business, we call partners statements Any operating of facts, those the including we expected

to any reports risks the risk Please on expectations with in about or future we result whether and as annual the concerning do materially actual risks. make, could COVID-XX, otherwise our or required We undertake, file based including by are factors factors new and disclaim the While current information more because information, these our we results to applicable events, see believe in of quarterly the and forward-looking reasonable, differ we statements, are as Form subject not risk uncertainties. a and any update law. for expressly statements any statements alter obligation XX-Q, SEC, forward-looking except

except Balance are today’s financial explicitly measures. cash cash During all revenue, flow sheet financial state we non-GAAP or a we and are flow otherwise, for GAAP basis. non-GAAP measure. metrics numbers where a on is Free call, discuss,

outlook, and now Genuity’s and virtually Before Co-Founder the will September to at attend turning Growth Internet on events. the forward results on Colliers XX Chief on Chris? Xth upcoming I XXth Officer. many Executive Conference to Oppenheimer’s to Technology, look Securities’ Annual Needham turn Conference Technologies company XX. the with Annual Conference August our Industrial Diorio, Chris call you like that Conference and virtually We note connecting & attend will to the August Communications these XX; Canaccord Annual of X; XXrd August on I’d Impinj’s

Chris Diorio

third quarters joining Thank you, causing in I and call. ones has and significantly COVID-XX of Impinj customers Ellen. Thank you the you unprecedented remain all first, the second safe in hope our well. loved for and our volatility short-term, affected and and are XXXX. your

and our secular the was markets, COVID-XX’s apparel, to short-term, life COVID-XX nonessential out, impact giving further varied negative. thing. terms in overall but our other severely stores impact accelerate with mid Looking with impacted every advance COVID-XX IC geography Starting long and mostly In retail opportunity closed. digital leading of we our the endpoint and believe connecting thesis the market, will by opportunities to

while environment, quarter endpoint second demand adjusting partners, from bookings. second also to inlay quarter first, to expedited first IC volatile to second quarter shipments from half, then rescheduled the Our backlog second slowing

and quarter in notably May, July. peaked with bookings second As revenue consequence, contracted in The improving requests our year-over-year. quarter-over-quarter a rescheduling

expect we inventory they consuming quarter, the and normalize by inventory third that quarter. are Inlay Our end today in first to partners of the accumulated the

endpoint smaller a meaningful quarter, On specialty side, used industrial, supply for mix and steady chain which applications, in richer-than-typical in still product margins. and second those opportunities but engendering ICs for higher the demand are brighter us, remained

systems also spot, declined revenue of former side bring the phase quarter-over-quarter North project by operational the modest projects. gateways to customer and end-user pullbacks project generating driven business, the ordering a second transitioning and despite second transition, systems the other quarter revenue. CapEx On at its quarter the year-over-year, more did American bright The with

hold. CapEx similarly count or put size, tight deployments delayed pilots that and on nonessential on hold. like latter, deal timing put deal the Also, baggage consumer-facing smaller manifested onsite cases, For lower use tracking, with many or required airline in race were and personnel

only systems productivity remains quantities low, our particularly and distributors levels on Today, Asia, sell-through currently or retail for are orders many in placing reopening lower inventory products are in North geographies, Finally, but today not stores in new particularly their America. inventory. reducing in

large some worldwide, While continue North end apparent endpoint expanding quarter tempers notable third a at retail the user. pandemic’s resurgence including IC American deployments expectations, our

the expectations. point follow quarter in quarter vantage systems our may typical seasonality. also end-user and slowness systems Today’s likewise third tightened that On suggests CapEx budgets temper not opportunities side, ongoing fourth consumer-facing the

the retailers and their pivot medium to sales modernize quickly We with to better of Many their and it for improve crisis. into inventories, accelerating experience, vectors fulfillment. reduce Visionary transmission. the those in-store today even we our virus COVID-XX in plans the customer and depths online to Turning are able omnichannel to satisfaction term, opportunity. see visibility RAIN-enabled saw accentuating felt were of retailers,

leading retail as chain, For stayed there, away returns, projects loss traditional prevention, users. traditionally example, holiday short-lived partners end and shipment peaks accelerated supply loss modernize their users plans COVID-XX toward with and and large and their seamless from In transition a self-checkout prevention RAIN-enabled to volumes ramped the operations. end to is prevention loss driving offering touch-free

accuracy. dock shipment Notably, scale seeing improve pace conveyor that only calls, provider a large a with supply are today second American and a forecast to at be a discussed significant difficult belts, will we manual any not touch measure. chain we believe logistics also North which We but items deployment reading but prior through and traction have reduce most is by on commencing are passing doors, and on to

expect With these supply revenue, to mostly deployments in strong COVID-XX other accelerating logistics balance also power of endpoint XXXX operations, beyond. exit not systems COVID-XX, but only the volumes only opportunities weather our sheet transition opportunities and We significant to we and of and staying invest impacts and as in chain long-term drive and IC side we stronger. retail not the will will but these

operation inefficiencies and seamless and demand. and long-term, Leading and modernizing insights, partners thing. the virtualization customers and and e-commerce, to in-store life deliver address believe the COVID-XX experience accelerate experiences giving want need we businesses to to online our structural do digital so, customer the they of investing every in connecting visibility, that RAIN their vision Looking will brings. To their are

and time are pipeline opportunities delay solutions, engagements more at better is Our Leading than, asking also our and richer deeper large innovations any pushing than, less. end-user capabilities, and and them. end expedite history. users are in not for They systems of us to not

SIs from have introduced, changed feel and pull IC, users. we endpoint engagements advancing, game-changing Our resonate end by COVID-XX. and top we large, like ISVs, do those IoT the have with world as tier they forever IoT products The providers visionary we vision the Impinj same advanced also the in are MXXX OEMs, a

our it end we the and We vision the partners driving are by pace realizing and users are toward with. energized

at Turning We of our new ability we proving in our by a believe product products, landscape new RAIN volumes and were MXXX Moore’s the same previously to production as spot the the down functionalities MXXX endpoint aggressively IC to the were performance change while delivered bright fundamentally families. IC improving ramps quarter that will production reader our out-of-reach. an adding endpoint RXXX time migrate Law,

seamless excited the design self-checkout, and first users product centerpieces innovation returns. The growth platform RXXX its RXXX RXXX the our and the key remain growth leading The powerful are and committed end performance functionality, We product by and our XXXX are affirming business. in RAIN recognition lines. for across CoreXX the to all new position of the also mode, future. prevention the for tagging supplier which for received Awards. our We partners and MXXX see Impinj both drivers loss now Design our creative as as retail innovator and enables both MXXX drivers, Our protected embedded and and in further

and introspection. leadership the well-deserved and side, quarter excitement Revenue Jeff, partner Excitement product Dossett’s On and He in excellence. Jeff Congratulations, sales, foresee successes promotion. promotion our your instrumental we been running Officer. brought and to Chief in organization. insights has both organizational second on brings our tremendous continued go-to-market Jeff

us, our targeted was us, will on we we, doing those no virtual happy The a of States’ United we confident were our employees difficulty] to for areas. fade To the to when employees, team let so. and be position our so And words so”. a all it. remain impact we work response, quarter Memorial of of deep a also make we In we second am introspection. and model into can next quarter. are to the we so added of perspective, making than silent and retention high on forget. second immediate inclusion evening silent me a with as the Floyd’s committed has that, instead our in environment well third murder productivity. and Today, will Impinj of from often Regardless, also COVID-XX’s better, We to talent that events company many memories, to quarter can closing diversity adapted few the exposed all closing, racism that I the as these George past. our and extend in May brought strive have ourselves they, it day and not the problem. “Together part stronger was I market a more. to will we, letter included, But today’s Day, happened dedicate challenging, XXth, not wrote XXXX, maintained from of In Employee entered [technical who in commit

we to lost benefits we in supply brightness quarter, can and picture, of center RAIN users with And of future game-changing the ahead, leading squarely improvements last transformations, the drive a retailers in end of customer and balance logistics. products adoption we bring sight brings. With sit is not accelerating of have experience a the that chain the the vision our sheet, big insights, and see that said I as bright. As compelling business and end-user platform strong leverage new visibility, and virtualization we

us. leading continue in leading on on for and and will apparel investing companies, focusing for opportunities them logistics We improvements retailers business and supply-chain operational

I well. We to adjusted to the path increase EBITDA keeping now Cary commentary. a Covid-XX. and expenses as of a second to fierce with will other our on so review Cary? leverage for on chart quarter our breakeven will we Be to our detailed side safe a eye and be close do over determination turn resources call win, and financial competitiveness the

Cary Baker

cover Chris, which everyone. earnings you well more on Today, we Thank market detailed afternoon are believe good appropriate the discuss will both typically metrics as given the I metrics, additional, calls and uncertainties. as we

million, million XX.X% XX.X% was and declining $XX.X in year-over-year quarter second Second $XX.X revenue quarter and XXXX with in compared XXXX. quarter first $XX.X quarter-over-quarter, million

XX.X% IC Second revenue $XX.X was declining and $XX.X quarter first second with quarter-over-quarter, compared in quarter million million, endpoint $XX.X XXXX million and in XX.X% quarter XXXX. year-over-year

rescheduling IC in endpoint declined new backlog this quarter-over-quarter, and partners driven inlay quarter bookings levels environment. and inventory significantly managing demand by Second year-over-year

quarter inventory expect they demand environment the third advantage retail recovering built take partners to inlay first the to of quarter We in in the reduce XXXX. our

that positive dynamic, momentum we will revenue in customer-specific our recovery, While limit bookings quarter see pace. our with third coupled adjustments,

of to a the than in have month week quarter, and have higher and second still bookings July improved go. over are June July July XXth, any As of significantly we

demand. in We be our quarter supply-chain customers inventory more that fourth complete their quarter IC expect revenue of our end-user indicative to and endpoint adjustments the third will

declining modest $X.X led with the quarter to in tight quarter and North CapEx year-over-year delays builds year-over-year second project quarter-over-quarter, $XX.X partner in quarter, grew COVID-related modest large reduce Second operational and inventory Reader project and revenue million XXXX. compared in quarter-over-quarter, due, revenue declined phase, impacted by transitioning and year-over-year Gateway quarter-over-quarter million XXXX in by systems with million, declined to both Reader IC XX.X% quarter. supply customer year-over-year that to from quarter-over part, second XX.X% and risk. and an American revenue revenue budgets. customer the $XX.X first was quarter revenue

distribution our for We inventory systems constrained in latter quarter reduced third revenue partners budgets, by continued sell-through, remain demand lower to handhelds. lower IC by expect reader and CapEx revenue, levels their rationalizing the retail part, tight for to due,

gross by lower last XX.X% revenue. XX.X%, XXX basis offset margins underlying margin On basis, second and quarter product second gross Sales a quarter. and with on was quarter-over-quarter was margins, quarter by XXXX. ago marketing by margin lower revenue. and driven $X.X year basis margin On charges in was a million in million. million, driven development $XX.X lower $XX gross E&O million. quarter partially Second $X.X XX% million. quarter operating leverage was compared gross product underlying a and General Research points, million was and on expense leverage $X.X XXX first year-over-year $XX.X administrative improved offset points, compared XXXX by expense improved partially Total expense expense improved with basis, and

$XXX,XXX profit a EBITDA Second compared of a million, quarter XXXX million quarter was first profit second with of $X loss in adjusted $X.X a and of in quarter XXXX.

lawsuits an and class-action from adjusted and EBITDA associated million $X.X have non-GAAP expected net shareholder expense, settlement administrative quarter costs We of our loss. general second of non-GAAP excluded with

Second loss million. quarter was $XX.X net GAAP

quarter non-GAAP or net using shares. XX.X a was million $X.X average million, loss count share, per share diluted $X.XX Second of weighted

cash set endpoint stage quarter XXXX. balance supply from Inventory quarter and for Impinj the Turning as will we transition In the adequate of millimeter of XXXX XXX second as millimeter first we our In ramp XXXX. with compared quarter the to family. ICs increasing in half $XX.X our demand XXX $XXX.X the we second MXXX. XXXX, as increase million, million, The down maintain short-term second a MXXX of will few net $XXX.X cash million by million driven well from I business. XXXX with ended property Free to quarter, totaled impacting COVID-XX and second activities $X $X.X in lower and the and million million to now cash provided due $XXX,XXX sheet, items the equipment totaled quarter-over-quarter purchases investments equivalents quarter was operating was was second $XXX,XXX. $XX.X production cash, our and the by inventory first $XXX,XXX. highlight flow quarter

we capacity or due availability demand that to a government nearly First, but temporary operating suppliers reduced to vigilant today mandates be continue operated at They in component our have recovered. environment. at were around capacity, closed dynamic are XXX%

best expense general Second, agreement outflow settlement-related shareholder expense a $X.X to We million we settle in outstanding recorded expect GAAP corresponding second administrative cash during litigation. an and have and our quarter a all protracted we quarter third this time was litigation factors, of we type, the and significant considering shareholders’ determined suits. After money, company’s interests XXXX. including the expense number a it of in to in of and settle that its

and digital As have enabling Chris look noted, we significant on opportunities ahead focusing forward for everything. us we life of to

we second underlying capital expense, and capital gross expenditures. flow the in team Third, the positive free managing quarter, cash margins and generated working operating mix product boosting from effectively strong

underlying expenditures expenses Looking will Operating consume into third quarter, and capital less those will increase, reverse. capital cash, benefits working will will increase product will mix favorable. be

the our to breakeven business, side on other balance our to use EBITDA to will confident plan COVID-XX. fund our in quarter return we the While we sheet adjusted in third remain of

partners prudent that about third our will end feel the of it Instead, give an quantitative guidance. ongoing ongoing we intend to we business on not considering to our users, Turning our basis. COVID-XX share we impact on is and do additional share to metrics outlook, not quarter

of July quarter scheduled As in third $XX.X ship million. Xst, was quarter to backlog

by your team, uncertain ongoing our a users side competitive suppliers XX% of the more against rationalizing in COVID-XX and the will delivering question-and-answer times. new down third volatility turn focused We upside we and quarter-over-quarter recover to and and In ship demand and call million, demand quarter the stronger partners inventory addition IC $X continuing environment. customers, COVID-XX by opportunities I their as levels. on our our limited you, emerging our on encouraging scheduled as operator new see signs to July to session. the now for investors, in our partners systems endpoint is these the company, third quarter In closing, the Impinj year-over-year. creating. uncertainty, in our and Despite end open were support I that quarter up quarter is third want the XXth, XX% thank other bookings of Further remain both to

Operator

our session. come from We Instructions] Company. begin And Please will & today with the question Needham first now question-and-answer [Operator Ricchiuti go ahead. will Jim

Jim Ricchiuti

of Hi, of at recovery to thanks. look way Good afternoon. to areas way maybe a the that there that other business might some if I'm that seen you And the with Europe of U.S. might you we us the us are with you're give if obviously, the any you the there's Is there anything markets at that look as We've of the wondering seeing. parts of spreading. sense wondering of address how up. issues and we've the to – I'm Yes. side. the course, can the trajectory on can some opening But is open there some recovery? as that And opened. retail seen, parts see give pandemic us share now have perspective

Chris Diorio

as and good afternoon Jim; to you Thanks, well.

Jim Ricchiuti

Chris. Hi,

Chris Diorio

think But I'm will going answer, can qualitative I Jeff. course, – We very of team be one to here. our tag with – this and just

words of do a and in return. chain to prepared what rescheduling adapt out their we comments can't COVID-XX. supply much some Some we're and peaking a as short-term I Cary see and seeing in a July to the logistics. return month. bit And uncertainty normalcy use the word little so we the end a medium mid- orders May because terms. the retail for stronger COVID-XX. the in more associated really made request associated said that fact my wanted being with and those to markets, bit a being I out was focus picture – there We're give about businesses long there July the the here market key with the of that is transformations to little about less And And about really and return and in in two our broadly users in then happening remarks

So we see return coming out this year.

know happened depending customers. do course, the we their see what these Of size other me little Jeff striving Maybe fourth But from work change answer large organizations. some bit And tailwinds help end with say out here question. in little didn't I bit quarter. That COVID-XX. hard points. on in to to directly with around It's now are a a can your I

Jeff Dossett

Dossett. Jeff Jim, this is

comments. of couple I'll Chris' a to Just add things

bright First in around of that, logistics, around all, timing and globe. the globe. add I'd and varies in think recovery industry different reinforce there the are I and chain then logistics would supply the of that the spots chain think supply I And of I sectors pace in geographies different and course,

seeing normal. to earlier are new returns recovery moderate Asia some it We a as in and recovers

proofs seeing we're So in existing of are and/or testing able business We're of return new general, members return as retail and bright in opportunity. spots reemerging to concept nonessential are team seeing or to either of to terms reemerging. work value, which proof deployments longer-term

So geographic that there we're the terms seeing but recovery, I think the bright spots variance is of around globe. in

Jim Ricchiuti

you're to of the seeing the wondering follow-up the pandemic IC out of the it's of to how just side certain into system installations. business. I'm more other of RFID market it's carry get on whether locations difficult one has directly of players the in that because side or tag the in on question had fact that The business cases, the Okay. is I about some the talked And even much

see visibility out impacting potentially to like an is sounds sounds don't nice you win it ability carried pandemic with But it in deployed? how of programs as – any to have in another to American the visibility your these that another there – some near customer. what like to that's Is much the term? how logistics extent alluded really You

Jeff Dossett

say it's inability been does preparation organizations impact that members pace. for larger systems to testing to again. projects Jim, I Jeff and And to other and able are the in have nonessential of deployments. team for return continue examples timing would workplace There where some the terms

systems by the differently is retail. it's business, I IC directly more So in endpoint impacted the business business do the enclosures the impacting whereas IC from think endpoint

to visionary to retailers access Chris said, So the opening bright person leveraged in omnichannel, in online closest and pickup but curb workplace, in-store not is improved that experiences, their supply noted inventory importantly so available it's rather shoppers remarks, RAIN maximize buy shopping being much chain, support that to leading to support costs. have investments to experiences. online returning That spot shipping from that online in a store, or and a worker to whether ship side inventory buy to minimize visibility customer buy satisfaction pickup his

we're timing return is to environment, changing we're adapt So globe would the creativity and projects, to impacting the I seeing say to pace. to nonessential resilience but systems amazing seeing – inability work some a for around workers very and

Jim Ricchiuti

Thank Thanks. queue. back I’ll jump in the you.

Jeff Dossett

Okay. Jim. Thank you,

Operator

question from will come Anderson [Operator Please Instructions] Security. And our ahead. go Charlie with next Colliers

Charlie Anderson

you for questions afternoon. start my on Yes. Thank wanted good and chain I supply taking to logistics.

there. lot a of interesting like Sounds traction

So lot with a on them? follow-up. Or Then it existing the more like be the I you with tail project opportunity. customer, wonder I've of of it maybe firstly, market? looks a on more project? that end just then the customer did to how you terms movement customer prior just if in in a that where into that sounded context relative project layer new the in new orders, there executed a get got the a first And would you could is has of any that

Chris Diorio

deployments Charlie, you of North being at first To Okay. it. and large also that there your a joining Appreciate existing for logistics are we other that customer. course, answer existing in thank opportunities us. the And customer, chain American opportunities very future. foresee question, for the some are supply there that

we as a gateway the we support to So and we we look sale modest to as prioritize opportunities. second quarter, had forward in best And future customer, we continue said, that them can.

opportunity and out providers, the I chain in – in the as other is another moving we as of noted terms logistics there. said forward, In script, there we supply –

can't means excited think either about deployment time as supply what to calls really seeing a and we to their a us, kind that have chain the at we'll and really logistics and very for pace We we're opportunity. that or more. it to and further of But speak size been And it least of and that for And see But has opportunity. giving I looking is future updates or forward for learn long significant further be us, of this on scope, very we in important transition some COVID-XX a it. portends of accentuated for it's at large period note accelerated another it time. and we've sense,

Of course, the for already there's meant they pilots logistics us. for a promising for had fact But ongoing significant large the and chain coming end future a committee that of in quickly, super we to come and already work online customer and another the supply online bunch some done. and have that is to stuff opportunities see

Charlie Anderson

And a Great. inventory. follow-up, for of on my then questions couple

secondly, And guys third some third be So working number the worked quarter? did that quantify it in to was willing needs I like the How through to if quarter, build sound be Inlay investments get one, to much the equilibrium your inventory fourth be to to going in there capital quarter. wonder the partners. in there at you'd then that's you and degree quarter yourselves of in the inventory out

terms means dynamics that understand And inventory to goes I'm driving just in So that. there Thanks. wondering if also what's the again. trying of up

Jeff Dossett

in place quarter your channel But inventory, third I reiterate think is with anticipate we healthy, is this exiting I that importantly, Jeff. in our on channel To partners. inventories Inlay question would meaning the inventories. I'll what Inlay appropriate first don't quantify

that inventories. to Inlay So they changing as quarter demand, healthy level respond And inventories to with their channel exit evolving third our of partners we are demand. expect to aligning again,

Cary Baker

portion is question. I'll this inventory take Impinj And hey Charlie, your the Cary. of

times long inventory take turn as can our have wafer in cycle And as into to period five goods. the finished months in cycle. buys We to long

really we by drop So was sudden done have anything than what other so of more our driven the terms inventory. in demand than managing the quarter-over-quarter increase

maintaining inventory. of forward, of our level XXX Looking current millimeter we anticipate kind

production our on modestly build will ramp side. We

wafers XXX then that MXXX on millimeter and the a on the product both the also to to RXXX. So degree is support launches. lesser really But

Charlie Anderson

much. so you Thank great. Okay,

Chris Diorio

Thank Charlie. you,

Cary Baker

Thanks, Charlie.

Operator

And our come with question ahead. will Please go Roth Scott from Searle next Capital.

Scott Searle

this for initially taking afternoon, but zero-touch I systems. orders And customer. that up system the talk of in some on for good the did could about bit then It shaping follow-up that quarter the the from deals you missed of assuming your side, the we that in magnitude are pipeline? Are they current getting visibility, systems larger comments, site in Hey is is to we're a any to larger third related I talk environments. like in environment maybe the I per you sequential terms pipeline provide for had in how bit thanks about COVID deployments? if earlier, know how little Maybe a my efficiency, opportunities little regard follow-on that you sounds gateways apologize to from your directionality? large a quarter. won't North American down third there starting Should be be question. pulling

Cary Baker

I'll then Yes. the over Hey hand Cary. it Jeff. to of first Scott, is take and portion this that

it guiding are systems' just to tight. terms to third quarter. opening. So expect another in are to Stores constrained CapEx budgets the from of perspective a quarter, be we now going be

in be modest going American Chris the North business, logistics So are There expect did But delayed. constrained quarter. an company. it as noted, the from revenue say, be the get, projects We I first overall, Jeff? to would to systems order third from will we additional be that.

Jeff Dossett

all which, testing begin some noted part, within say opportunities, And overall COVID-XX the value percentage not often percentage. on by been our of has In had pipeline of pipeline, influenced of COVID-XX. as in by Chris increased as large projects, smaller deployment the the which in disproportionate and pipeline, has initial But which, quarter. the a of I validation feel in of would terms overall and as his opportunities an have positively large terms impact of encouraged remarks, systems do we of a

nonessential as members again, Large to return to disproportionately have impacted though. short-term the opportunities. opportunities have team geographies. workplace only the been many So unable in in smaller been in-quarter Those

Scott Searle

that that's of the terms gets of ramp but follow-up IC are How quickly on market endpoint it on on that just in What the more calibrate you is bit in recalibrate into gross in the quarter? as starts an nonretail could a be the well, to know Could that that just normalized, to still it's that front? were introduced. maybe I mix unusual expectation terms around second not that looks MXXX of lastly, what to set little I us and on share or like building as I front? better numbers front. If Thanks. Is the think, maybe as then end MXXX. for And market seeing retail, the us margins, pipeline front. meaningful you're production? early the expected And particularly expectation circumstances

Chris Diorio

Thanks, Okay. Scott.

past rough retail, tag Chris I other spoken the that's volumes, in of endpoint think roughly then roughly IC middle one. opportunities. one-third we're the is is part being the question and one-third the bit team Cary going latter hand about roughly for I'll and then to breakdown off and of two-thirds starting, as Jeff for This to a good part. this apparel, – and retail We've

some said of not for specialty as opportunities were some as quarter, impacted of the second the retail environment. much the we As other opportunities,

significant just expect believe a shift where decline we transient you a think – can been for would the now. more the the have dropped. it But I So second have quarter, the there don't to than have to opportunities. retail right that percentage shift retail that have quantify other seen would in we data

it's might the traditional we but over expectation logistics And side COVID-XX, one-third, would percentage the endpoint that of go back some then Jeff? Our two-thirds, overall supply the even as rebound opportunities of IC still probably at we'll will volumes. And and start up. increasing, see, on those chain other until back. least gradually though that to the an ramp retail, to time, total you decrease expect, as to of is

Jeff Dossett

Yes.

MXXX In I’d market excited say the performance terms very end of Impinj capabilities our are the IC by partners customers endpoint reception, and series. of and

adoption done partners We are for we've in very grow And at anticipate prepare work quarters close our market that scale. the ramp of to to come. appreciative we production will the in with collaboration

Cary Baker

MXXX. the the MXXX we out ramp, to Once the be Cary. expect to is of margin. margin this Hey regard accretive production get Scott, from the to yes, we impact In

this think to end I see year that year the kind benefit. when So beginning of start next the we'll to of of

the in as was but MXXX margin leverage on impacted production on both volumes. QX, ramp favorable mix that offset the by have impact we it small shipping a margin revenue. started And MXXX So gross product in QX, well an as more did of lower the impact the

Scott Searle

Great, you. thank

Chris Diorio

Thank you, Scott.

Cary Baker

you. Thank

Operator

come Craig And Morgan ahead. Please our from will next with Stanley. Hettenbach question go

Craig Hettenbach

maybe back terms In you. on get can been around chain kind very some that you're the can you just a to of pandemic. fluid normal think when touch the kind depletion the that But of for thank looking Yes, you supply of seasonal has rate? understanding you in signals trend? of inventory And

Jeff Dossett

This is Jeff.

the that quarter. say in expect Inlay with thing in the first – we were will partners address would I part continue think burning third is down the that I our first inventories by during quarter, accumulated demand to that

appropriate and healthy third exit inventories channel quarter with at that to time. expect We

Chris Diorio

add be just quarter is that's It's seasonally not to fourth not market see And forward, what's obviously, demand we given quarter. the at that It's really typically, atypical IC. that – for clear. going least fourth down, transpiring clear the pandemic, in with the in see then case, right endpoint we it's I’ll now. But going

we it's year is either the the in exit we for endpoint don't the seasonality going as to the system this the made IC side. Hence, that what so trends. comment to typical seasonality the us difficult call year or be And side we expect really script follow on to

Craig Hettenbach

then Got know are trying of a design in different to hopefully, would system kind these for just bit, the momentum as you as maybe, of engagement But well. some work just terms And Chris, side, into through follow-up, design CapEx environment. is? which engagements? kind all it. the events environment given on Thanks then the of level for And what just to mentioned the a speak understandable the what business? is just lower in of can translate I that stabilizes But companies as you external just that. the And

Jeff Dossett

my been or able – pace expect by intention short-term. deployment quick we COVID-XX, first that My impacted planned RAIN, the the members not has would that has to being the of innovation been impact of on say Jeff. But be testing some would of be work. relatively But to nonessential is there's projects to of I continued. return but of systems This team response – some that

and remain close partners and I engagement both think able been to Impinj who are in planning have end customers communication with RAIN-based deployments.

your deployment, so Did been impact. that optimization on-site some but necessary answer question, is configuration broad Craig? there's specific where and And made, progress prior is being scale deployment, to

Craig Hettenbach

It the color. did. appreciate I

Jeff Dossett

Okay.

Operator

Company. ahead. next Jim Needham And & with our come will go question Ricchiuti from Please

Jim Ricchiuti

Cary, if Travel I shows wondering there line. trade give we virtually aren't the some realize nonexistent. to to I'm But forecast as difficult us it's how mean think about on. is can going you clearly, operating I indication expense. should very top

should your levels? thinking we OpEx about how So be

Cary Baker

Yes, question. thanks for the

you're ground to at So started to second the with the quarter halt and slowing in shows trade and the regard exactly a quarter. end of travel entertainment, first and right. That

But be new budgeted. to in the to investment we'd to quick had was to bring this adding We our It's rest improve. market. are in R&D. adding engineering as to adding in we our a products continue as throughout We'd of hire Where right in still continues and face-to-face. just now. the at will like not hiring reality organization. investing customers to are beginning of expect this talent I space we environment it is now. with challenging not we're the of And and see say It's a to so. meeting thesis That year, little trade one the resources be probably resources we like are environment Though and that out right this just shows we on it year.

Chris Diorio

investing I'm that that guess see end we to new in projects I bit. also some products. We're a investing little there. in going the for add out to We're the just R&D of And R&D for customer

We're projects customer requirements to to we're our ability to these about actually from and end meet the pull people end point So customers. putting these on them. accelerate large seeing resources the and against deliver

Jim Ricchiuti

you've your the fourth quarter. one that to suggesting I saying? Got sounds it mean the just sure quarter, And it. be you're you're seasonality misinterpreting like make may. quarter to stronger one, not experienced. what about potentially that has want the if not that third other I comments fourth than Is normal exhibiting the the I'm potential I

Chris Diorio

Jim, is Well, this Chris.

burn the the So seeing down some at through inventory we're the of third obviously in we channel end side quarter, the other third which on – quarter. is come –

in seeing in because we that general stuff the of haven't space over So environment uncertain we're buying We're couple much retail also there. opportunity past an seeing the been an quarters.

So not to inventory, products the their are and retailers into basically, – then they're and word, – the quite right stores. the guess out, to figure items the bringing I get attending that's rationalize – basically their but RAIN-enabled market

So typically, seasonally we IC third see quarter. endpoint the for down in being the fourth the because tagging as quarter happens

for we're to what by will a be customers, as expecting time predict that declining the happening right think around driven us difficult both as which now. is I that we see will inventory end at this and the some difference is difference channel is well rationalization

Jim Ricchiuti

you. thank Okay,

Chris Diorio

Jim. you, Thank

Operator

the conclude will back question-and-answer remarks. our conference for to this Diorio to And closing like I'd any turn Chris over session.

Chris Diorio

call Bye-bye. today. your you and the Thank I for again. safe Thank well. are all that and joining hope And and you loved remain Okay. you very much

Operator

for concluded. presentation. now Thank you has conference The attending today's

lines You your time. may at now this disconnect

Impinj (PI) 29 Jul 202020 Q2 Earnings call transcript